Another 11th Hour Plan

Roughly three months after citizens were treated to Pittsburgh City Council embarking on a series of pension solutions that stretched until New Years’ Eve (hours before a state-imposed deadline) we now have the events that transpired at today’s Port Authority board meeting.

In sum, service cuts amounting to 15% of service were to go into effect Sunday the 27th; the board was set to discuss an offer by a private operator to take over two routes that the Authority was vacating as part of those service cuts.

Then came a late-minute plan by the transit union: they would forego next year’s 3% wage increase, take a 10% pay cut now, and in exchange avert the service cuts (and by extension, the opportunity for PAT to contract with the outside vendor). The union’s proposal amounts to $18 million, some $12 million short of what the County Executive insisted was necessary to bridge the gap. As of this writing the PAT board is considering the offer and is supposed to determine this evening if the offer is palatable. If it is, the union will vote on the concessions tomorrow.

This messy episode (it is not the first last minute plan hatched to avert cuts or financial problems at PAT) could have been handled differently. The board could have not entertained any concessions of less than $30 million; they could have told the union to feel free to make concessions but they were going to go forward with their cuts and, if concessions proved solid, would consider restoring service and employees. Instead, they, like City Council and City staff in December, are under a ticking clock trying to rush and determine if the plan is viable.

As Leaves Fall so do Gaming Revenues

Pennsylvania’s slots parlors are now deep into gambling’s fall slow season. This coupled with the impacts of a national recession has caused one area casino to announce that up to 100 employees will be laid off. Instead of the beleaguered Rivers Casino laying off workers as might have been expected, it was its southern neighbor, the Meadows.

That the Meadows Casino made the announcement came as a bit of a surprise. Their Gross Terminal Revenues (GTR) to date had been well above expectations-they are averaging $5.9 million per week since the beginning of June which gives them a pace of more than $307 million. Even though wagering and GTR at the Meadows had declined slightly with the opening of Pittsburgh’s casino, they should easily beat their initial forecast of $236 million in annual revenues.

Compare these results with those of the Rivers Casino. Since opening to much fanfare in August, the Rivers is averaging just more than $4 million for annual pace of $210 million-well below their projections of $427 million. Their performance to date has been so worrisome that they renegotiated their annual payment for the new hockey arena when it was clear they would be unable to pay the full $7.5 million by the end of October. Instead they made a partial payment of $2.35 million with the balance due in April. (It’s worth noting that the Meadows’ has no such community benefits obligation.) Standard and Poor’s also lowered the Rivers’ credit rating from a B to a B-. It’s fair to say that things are not working as the owners (and politicians) had imagined through the first few months.

However, true to their all-is-well mentality, management at the Rivers insists everything is fine. In fact they claim to be in hiring mode to staff their newest restaurant with several more open positions at the facility. Is this whistling past the graveyard or do they expect activity to pick up? As we noted in a recent Policy Brief (Vol. 9, No. 52), the fall season has typically been low for Pennsylvania’s casinos and activity remains low through early spring.